Embedded finance is a trend in financial services, altering both the shopping experience and the broader financial system. 70% of banking executives expect most financial services to be provided by non-financial entities by the end of the decade [1]. Many industries anticipate a significant shift towards directly integrating payments, lending, insurance, and even investment into their platforms. Undoubtedly, this is one of the biggest changes on par with AI the world is starting to undergo. Facilitated by innovative financial software development, consumers get improved convenience, financial institutions (FIs) are new sources of revenue, and distributors get a share of the profit and increase their customer base. With different strategies still being tested by major players, let's see how to make embedded finance integration beneficial for all parties.

Understanding different embedded finance strategies

Let's first understand what embedded finance integration entails and then go into detail for each node in this process. Embedded finance is an umbrella term for diverse financial services distributed by a company that does not directly specialize in finance. Examples that have already entered our everyday lives include embedded insurance in car-sharing and BNPL services. 

Three parties participate in embedded finance integration: the provider, a bank or fintech that supplies the financial infrastructure and the balance sheet; the enabler, an IT company that builds the technology; and the distributor, the non-financial institution that integrates the service into its product. This partnership does not require exclusivity. With the necessary technology implemented, one provider can connect to multiple distributors and vice versa.

Both FIs and potential distributors are looking forward to embedded finance

Embedded finance use cases

All financial services can be embedded, creating endless possibilities for a productive partnership. However, to make the matter more tangible, let's examine the most popular and successful use cases of embedded finance.

  1. Payment systems: users can conduct secure, frictionless transactions without leaving the app. This feature is particularly beneficial for organizations aiming to manage the entire user experience, thereby maintaining all customer interactions within the brand's ecosystem.
  2. Lending: embedded credit issuing allows companies to offer personalized financing options at the point of sale. This could be through loans, BNPL schemes, or lines of credit. For example, an online retailer might offer instant credit at checkout, increasing the average order value and reducing cart abandonment rates. Lending can help merchants on marketplaces by providing them with the necessary capital to expand inventory, enhance marketing efforts, and improve operational capabilities, thereby driving sales and facilitating business growth.
  3. Insurance: allows users to add coverage or guarantee to a product at check out. Insurers gain access to new distribution channels, reaching customers at the point of highest intent. For businesses, it enhances the customer experience by simplifying decisions and processes, potentially increasing customer satisfaction and loyalty.
  4. Deposit accounts and branded debit cards: customers can manage money directly through apps or websites and enjoy personalized offers. This is particularly convenient for merchants on marketplaces or Uber-type apps where keeping the transaction within the ecosystem can prove very beneficial. A branded debit card can improve customer loyalty and provide valuable insights into spending patterns.

These categories represent the most popular forms of embedded finance integration. However, there is ample room for creativity and exploration in this field. Notably, investing in implementing one of these categories doesn't automatically provide capabilities in the others, as each necessitates different business models, organizational structures, and strategies. Furthermore, the suitability of each category varies depending on the type of business and the specific business model that a bank might partner with—more on this in the next section.

Revenue and partnership models

The success of embedded finance integration hinges on the effectiveness of the partnerships it cultivates. The variety of potential combinations of financial and non-financial services is immense, with each configuration requiring its optimal partnership model. What a particular arrangement will look like depends on the financial service provided, the context it is embedded in, and the goals of each party. Both providers and distributors may be drawn to different benefits of embedded finance: cross-selling opportunities, decreased acquisition costs, improved product offerings, access to extensive customer data, and additional revenue sources. 

Expected earning from implementing embedded finance

The financial and other benefits of integrating embedded finance services vary greatly for providers and distributors, depending on the type of service and partnership model. For example, most profits typically go to the provider of lending services due to the associated credit risk of issuing loans. However, with payment and deposit account services, profits aren't as closely linked to risk-taking. In these areas, profit distribution favors those controlling the customer relationship instead. According to McKinsey, the total profit in lending is distributed 70/30 between the provider and distributor, while in payments, it's 45/55 [2]. This underscores the diverse applications of embedded finance technology. 

There are three main revenue model types: direct, indirect, and complex:

  • Direct model: The provider receives a flat subscription fee or a percentage of the transaction value, but the distributor holds the customer relationship and the revenue from the service. For example, a business software might want to include instant payment processing in its product and pay a fee to an FI to make it possible.
  • The indirect or affiliate marketing model: the distributor acts as a way to market a service for a fee while the customer relationship and the asset are owned and profited from by the provider. Online marketplaces or ecommerce platforms that offer loans or insurance at checkout often use this model.
  • The complex model, also called Banking as a Service, involves a deeper integration and a more complex structure that might involve multiple layers. In this model, the host platform seamlessly integrates the financial services to act like a bank. The host platform partners with a licensed bank and offers banking services under its brand, handling much customer interaction but relying on its core infrastructure.

Read more: Open Banking strategy for US and Canadian banks

Revenue models of embedded banking

Where do enablers fit into these models?

FIs have two distinct options for becoming available for embedded finance partnership: integrating an API and developing a custom solution. API integration involves using predefined protocols and interfaces the financial institution provides to connect the host platform's system with the financial services. This method is largely plug-and-play, with the API handling specific tasks, data exchanges, and functionalities without extensive development effort from the host platform's side. Because APIs offer predefined functionalities, there is limited scope for customization. Platforms may have to adapt their processes to fit the API rather than vice versa.

A custom solution involves building a system or application specifically tailored to the needs of the financial institution and the distributor platform. This approach allows for more flexibility and is usually designed to handle complex or unique requirements that standard APIs cannot meet. A custom solution can promote an FI into the role of enabler, removing the need for an additional party in the arrangement.

Banks' and fintechs' perspective

According to IBM, 20% of the financial executives surveyed indicate that their organizations have implemented embedded finance, with 51% still working on implementing it. However, only 10% are satisfied with their progress [3]. Let's explore the process of embedded finance integration from the perspectives of banks and fintechs and see how to achieve the best results.

Embedded finance integration pipeline

Technological readiness

The implementation begins by ensuring the technological infrastructure is robust, scalable, and secure. This involves selecting the right technology stack, prioritizing cybersecurity, and designing systems that can handle increased transaction volumes without degradation in performance.

N-iX brings together over 2,200 professionals certified in industry-leading development practices and cybersecurity standards. We have successfully delivered over 250 financial projects, including solutions for fintechs, banks, and other financial institutions. Our experts can help you achieve new milestones with embedded finance and ensure effortless compliance and scalability. 

Read more: Cloud-based Payments Platform Development for Currencycloud


Stay ahead in banking: Explore 6 tech trends shaping the industry in 2024.

report img
report img


report img

Organizational changes

Implementing embedded finance capabilities might fit into the larger process of digital transformation in banking. In the simplest words, IT systems within the organization have to be in such order that a program with no prior knowledge of the system can locate the data it needs. This is not always the case within complex legacy systems.

Create a developer portal to ensure that the internal team maintaining the infrastructure has all the necessary information. This portal will be a hub for all API interactions and should provide comprehensive resources. These include API documentation, code samples, best practices, and forums where developers can exchange ideas and solutions. 

N-iX adheres to best practices in software development to deliver top-quality solutions. We employ Agile methodologies for efficient project management and swift product delivery. Our teams use defect prevention practices to reduce rework and expedite time to market. We keep our documentation current through a systematic approach to document management, using sophisticated tools and technologies to automate the process of document creation, management, and updates. We comply with ISO 9001 quality management standards for quality assurance and prioritize quality throughout development.

New offering

Once the technical infrastructure is ready, implement services that take advantage of new technological capabilities, ensuring they meet customer needs and market demands. Form strategic partnerships with technology companies, other banks, and fintech firms. Evaluate various revenue models to find the most appropriate ones, considering market positioning, partner strengths, and customer preferences.

Receive feedback from analytics tools and iterate

Use analytics to track the performance of products and services. Utilize this data to refine and continually improve what's offered. Set up feedback loops to collect insights from end-users and partners, guaranteeing products stay relevant and competitive.

N-iX has extensive experience in providing data analytics solutions for the banking industry. We help banks and financial institutions to leverage their data effectively, gain valuable insights, and make informed decisions. We also build BI solutions from scratch and optimize the performance of the existing ones. Our BI experts build efficient Data Warehouse solutions and OLAP cubes and leverage different reporting systems to produce lucid reports and provide a 360-degree view of your operations. 

Read more: Business intelligence in banking: track, infer, project

Distributors' perspective

85% of non-financial companies pursuing embedded finance integration have reported that it has helped them acquire new customers [4]. This means that this technology is a safe bet; it comes at a low risk and high reward for ecommerce and other non-financial businesses. Yet, a few best practices help ensure that the adoption not only enhances customer acquisition but also meets the operational and regulatory demands inherent in offering financial services.

Embedded finance help acquire new customers


Clearly defined and prioritized goals are at the heart of any successful project. Embedded finance implementation in ecommerce is often about removing barriers to action to improve some defined KPI. In other industries, the objective might be to expand offerings or acquire new revenue streams. Regardless, the implementation strategy should include clearly defined KPIs and an understanding of how embedding financial services will help achieve them. Based on this information, it should be easy to choose the service, the context of its embedding, and a partnership model.


Potential providers should be evaluated and considered based on their track record, security measures, customer service, and integration capabilities. It is crucial to ensure that the chosen providers are a good fit. 

New financial services should seamlessly be added to the current UI/UX without disturbing the flow.

As financial providers are heavily regulated, acting as a distributor could cause the company to enter its legal field. Additionally, if the integration is more extensive, a risk management strategy should be developed to handle regulatory risks, which includes appointing compliance officers and conducting regular audits.

Read more: Fintech development outsourcing: A complete guide


All these considerations should go into the requirements for the outsourcing provider conducting the integration. The right partner should have robust technology solutions and a deep understanding of the regulatory landscape associated with financial services. Evaluate their:

  • Experience with the BFSI domain: Potential providers should display diverse experience in developing financial solutions. 

For example, at N-iX, we have delivered over 250 projects in banking, fintech, insurance, and capital markets. We have 300 experts specializing in developing innovative and customer-oriented financial solutions. Our experts can help you explore the potential of embedded finance in your business and guide you through its implementation.

  • Compliance and security credentials: Ensure the provider has experience in regulatory requirements relevant to your market and has a strong track record in maintaining data security.

N-iX complies with the highest industry standards and is committed to a security-first approach. We help businesses navigate new regulatory requirements and can build secure infrastructure, assess and test current systems, implement new anti-fraud measures, and set up a security operations center to safeguard data.

N-iX security compliance in finance


In conclusion, embedded finance transforms the shopping experience and the broader financial system. Various sources predict that this technology will substantially benefit all involved parties. Successful integration demands a robust, scalable, and secure technological infrastructure, significant organizational changes, and strategic partnerships. This new era of financial services promises enhanced convenience for consumers, new revenue streams for financial institutions, and expanded opportunities for non-financial entities, heralding a major evolution in the financial landscape.

Talk to an expert about your embedded finance integration project


  1. How banks are staking a claim in the embedded finance ecosystem, EY 2023
  2. Embedded finance: Who will lead the next payments revolution?, McKinsey 2022
  3. Embedded finance: Creating the everywhere, everyday bank, IMB
  4. Global Business Perspectives on Embedded Finance, Accenture

Have a question?

Speak to an expert
N-iX Staff
Yuriy Voloshynskyy
VP, Head of Center of Excellence for Finance

Required fields*

Table of contents